In Aristotle’s view, “true wealth” was finite, restricted to those articles “useful to the association of the polis or the household,” and thus necessary to sustain “the good life.” The exchange of commodities for money with the aim of making a profit was an artificial, and potentially destructive, enterprise. Trade, Aristotle declared, should be mutually beneficial, affording both parties with what they needed and otherwise lacked. Selling at a profit, on the contrary, always served one participant at the expense of the other. What can a philosopher born nearly 2,400 years ago, and a Greek philosopher at that, explain about mortgage bond derivatives, sub-prime borrowing, securities lending, credit-default swaps, international bailouts, and the consequences of tumbling off the fiscal cliff, all of which have combined as the “perfect storm” to engender a worldwide economic crisis? The answer is obvious. What can this same philosopher reveal about the disorientation of current economic thought and practice? The answer is not so obvious, and we would do well to consider what he has to say before we plunge into the abyss.

Aristotle (384-322 B.C.) described the proper object of economic activity as the careful management of resources rather than the unrestrained acquisition of wealth. Money for Aristotle was a convenience with no inherent worth of its own. Since some commodities were difficult to transport and others perishable, men had invented money to facilitate transactions. More easily portable and of a fixed, or at least an agreed upon, value, money itself was barren, sterile, and unproductive. In time, Aristotle conceded, men had begun to buy and sell not primarily to satisfy “the natural requirements of sufficiency,” but to generate maximum profit. That change transformed the nature and purpose of commerce from acquiring and husbanding scarce but essential items to accumulating a vast, indeed an unlimited, fund of currency.

More reprehensible was lending money at interest. Aristotle condemned the deposit banks, which had emerged in fourth-century Athens to offer commercial loans, and, like his teacher, Plato, regarded moneylenders in general with suspicion and disdain. “The trade of the petty usurer is hated most,” he noted in The Politics, “and with the most reason: it makes a profit from currency itself, instead of making it from the process which currency was meant to serve.” The extension of credit, designed to stimulate economic growth and development, just as often upset economic operations and imperiled community welfare. Greek farmers, for instance, who were heavily mortgaged, sold or lost their lands to pay their debts, reducing themselves from productivity to idleness, from affluence to penury, from independence to bondage.

Those who pursued wealth for its own sake, Aristotle resolved, were confounded about the purpose of life. Having yielded to their boundless desires, they had, at the same time, enslaved themselves to the unremitting quest to gratify them. Prudent men knew better. Exercising self-restraint, they accumulated wealth sufficient only to preserve an abundant and virtuous life. The effective management of property, it turned out, required above all a discipline of the soul. Without it, men unfailingly surrendered to greed and rapacity, as has now been evident for more than 2,000 years.

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"Trade, Aristotle declared, should be mutually beneficial, affording both parties with what they needed and otherwise lacked. Selling at a profit, on the contrary, always served one participant at the expense of the other."

Well, while I think the general thrust of your piece is sound, this is just wrong: a mutually beneficial exchange profits both participants. That is a key insight of the marginalist revolution. We don't have to embrace economism to undertand Aristotle got this wrong.

Aristotle's tonic for our times: his suspicion of the abstract character of capital and gnostic contempt for tangible assets often embodied by doughy-handed money lenders. Hey–I've benefited from the capital markets, but I think the underlying assets are more real than the numbers that represent them.

Aristotle's aim of the good life and human happiness was understood as citizenship in the full sense. The great contribution of classical economic thought was to demonstrate how commercial practice that appeared motivated by lower aims served the highest aims. Commercial republics, by virtue of their steady accumulation of wealth, afforded greater amounts of people to acquire the important necessity for a happy life: liesure. Humans preoccupied with physical toil do not enjoy the proper conditions for contemplation and the philosophical science which alone makes us more human. Modern economics made liesure available to the masses.

The real problem always begins when the aim is relativized. The great flaw in Austrian economics is Mises' illogical and politically catastrophic subjective theory of value (part IV of human action), which effectively equates ideas of universal Right with unscientific prejudice.

In our time, subjectivism has devolved further into nihilism. Moral judgement in public life is no longer merely problematic, it is now impossible. The romantic Nietzschen quest for values beyond good and evil has not played itself out because the masses are not philologists. Tell them there is no God long enough and they will turn to His opposite, not make a new, better one.

In the end, what is really at stake is self-government. China and other political tyrannies are demontrating the efficacy of enlightened despotism by administering free economic remedies to their societies. The West, politicaly republican, behaves in practice like a democratic tyranny. Guided by their self interest, voters treat ellections as if their retailer was asking them to vote on prices in the store. One cannot do this. People must be very aware of Aristotelian political virtue to govern themselves. Sadly, they vote like they shop – this is devastating.

If “profit” is more than what is necessary to compensate the merchant for his investment and his labor, then Aristotle is correct, even in modern terms. Economists call that “economic rent,” an amount paid to a factor of production over and above what is necessary to keep it in production at its current use.

In a competitive market, where there are lots of suppliers such that none have any pricing power, the market is competent to determine that. In other cases, which are most cases in our economy, one has to work form some acceptable rate of return.

Let’s admit a few things. (1) Land is a form of wealth that can accumulate very much like money. There is nothing inherently sacred or profane in any form of wealth. What profanes is inordinate attachment to wealth and how it is used. (2) Prudence is essential to thriving in any environment, whether or not money is a part of the culture. (3) Abuses can enter the front door through cronyism and enter the back door through government largesse. Either entry corrupts government (through expanding influence) and the people it helps (through sowing moral hazard, even beyond the sins of presumption and robbery). (4) Such corruptions lead to economic distortions, in particular, market bubbles, such as the housing bubble. (5) Bubbles are never sustainable and always burst unless they are deliberately deflated by more deliberate and moderate means. (6) Bubbles always draw innocent people into their web, and when they burst often destroy lives. (7) As a consequence of these and related dynamics, the focus of the wise, including Aristotle, is best spent on virtue and only secondarily, if at all, on systems design. (8) Virtue is essential in individuals, families, communities, municipalities, states, nations and their institutions, especially government. All are strong or weak depending upon the presence or lack of virtue.

Aristotle is my favorite author. I happen to be rereading Politics now. There are very few things he got wrong, and most of these things was only because he lacked the means of physical, material evidence we have today. Had this man had even a basic microscope and a thermometer he could have traveled to the Moon. Well, you know what I mean. It would greatly increase our civilization at every level if he were properly taught in school.

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The conservative is concerned, first of all, with the regeneration of the spirit and character—with the perennial problem of the inner order of the soul, the restoration of the ethical understanding, and the religious sanction upon which any life worth living is founded. This is conservatism at its highest. - Russell Kirk